Feedback Loop: DSP Confessions & Programmatic Buying

Each Friday we ask an industry leader to critique Digiday’s coverage of the industry that week. Walter Knapp, COO of Lijit Networks, does the honors this week.
Confessions of a DSP Salesperson
For this week’s confession, we interviewed a demand-side platform sales person about what this person sees as the hype versus reality of programmatic buying.
While entertaining, I think the article’s main take away is that there are real and important pressures on the current system (non-programmatic buying) and at the same time the sheer speed and youth of the movement leads to natural immaturity of the actors. Throwing the industry under the bus isn’t what I read here, instead I see this as opportunity. Clearly the sophistication in targeting, measuring, and optimizing is rapidly advancing and the payoff is obvious when you see the kind of marketing dollars flowing toward DSPs and ultimately to websites. That doesn’t mean bad actors don’t exist, they do.  My view into the market as the operator of a major exchange platform is that the good guys are winning.
Why Programmatic Marketing is the Future
Media fragmentation and the explosion of personalized media are cropping up so rapidly that it’s almost impossible for digital marketers to keep up. The rapid rise of Pinterest and Flipboard are just two examples of how quickly the digital landscape can shift.
I had the opportunity to sit on a panel earlier this week where a top ad agency exec in charge of media buying is steering more budget into even more programmatic means because it drives real and measurable results across multiple formats and platforms.  Messages can be delivered, tuned, optimized, amplified, measured, tweaked. Budgets can be shifted, increased or decreased. All this isn’t to say that higher funnel and/or more hand-curated conversational and social “activation” is any less important because it taps the emotion people need to engage with a brand. Emotions on the other hand are notoriously bad decision makers, particularly at the scale required by major marketers.
Life can be tough in the agency business. Clients consistently expect greater results for smaller fees, which has placed increased pressure on the typical agency business model. As a result, both holding companies and individual agencies themselves are seeking new ways to boost their incomes, not all of which are in line with traditional agency roles. 
I spent a good deal of my career in enterprise IT and systems integration. It’s commonplace to have Agency-Vendor relationships for a whole host of good and valid reasons. The author is 100 percent right in the summary paragraph that its all about disclosure. The only thing I’d add is how the economic value is distributed. Agency-Vendor relationships can lead to many efficiencies that accrue to the client but without clear disclosure (such as laying out the specific benefits of the relationship) it can quickly degrade the partnership. The looming cloud here is the economic benefit to the agency that doesn’t flow directly to the client. If that’s the case, then clients have a great reason not to trust their advisor.
Rocket scientists (aka computer scientists) write intelligent algorithms — which consider thousands of data elements in real time — to do everything from perform planetary science to identify terrorist threats to model global weather patterns. They also improve advertising.
Coming from a primarily programmatic-driven POV, I get it. Completely agree that the industry needs (desperately) more computer scientists. But, we also should take a page from the financial markets and in particular, hedge funds. There are many different types of hedge funds, many “rocket scientists” on their staffs, and many algorithms they’ve developed all of which are designed to find and exploit the best economic yield for their clients. The problem is that its a market and markets behave like people — unpredictably. The variability of the market, unforeseen consumer events, unknown unknowns, means that while we love algorithms and I’m sure several companies have the best one. The industry still needs marketers that intuitively can make decisions based on their understanding of human motivations and not just data.
Busting Online Ad Myths
The Web is no stranger to Internet legends. The same can be said for Web advertising. ComScore exec Kirby Winfield has an interesting list of the most pervasive myths in online advertising, including how it doesn’t need the GRP, the death of ad networks, the year of mobile, and the idea that ad buying is becoming like the stock market. Perhaps Winfield’s most prescient point has to do with whether brand dollars will come online because of ad tech. Not so, he notes.

I really enjoyed this one. Great commentary on the common soundbites I too hear all the time. I’d add just a bit to some of the points. Brand dollars aren’t coming online to the degree we want them to, and its mostly our own lack of creativity. Maybe that’s what Kirby means by “television itself will come online.” The TV medium is a storytelling medium and online to a large degree is not. That’s our fault and its fixable the more social and conversational we can make online campaigns. I also agree with the financial metaphors being a bad analog to programmatic trading. The primary distinction in my mind isn’t the “insider trading principles” but rather that the commodity itself is perishable unlike a stock. It’s more like trading weather futures.